Having a place for everything isn’t just about aesthetics. Being unorganized, especially with bills, can create extra work and subject you to late fees. The following strategies will help you bring order to your paperwork.
Create a command center. Ideally, this area - a desk or another dedicated workspace - should encompass an ample surface, a computer, in-boxes for unpaid bills, files for long-term storage, a paper shredder, and office supplies. Other essentials include a comfortable chair and an appealing setting, because if you don’t want to sit there, chances are you won’t want to work there.
There are two phases of dealing with bills: paying and storing. If you’re able to submit payment the moment you receive a bill, the first isn’t an issue. But, most people must coordinate due dates with their paychecks. The most straightforward approach is to label two in-boxes with the dates of upcoming paychecks (for example, the 1st and 15th). As soon as you open a bill, put it in the appropriate box.
To keep track of bills after they’ve been paid, store them in file boxes or accordion file folders, organized by month rather than by type of bill.
The essentials of an organized desk include a filing cabinet, paper shredder, in-boxes for unpaid bills, and a bulletin board. (Kate Mathis)
Many people don’t know which receipts they should keep so they hold on to all of them. You can, however, get rid of many of these receipts immediately, rather than stuffing them into your purse, wallet, or desk drawer. Think about which receipts you really need to keep. If you find you always eventually toss receipts for everyday, non-tax-deductible items such as groceries, get in the habit of throwing them away immediately. Save the ones you need to hold on to - for items you may want to return, appliances, medical expenses, and home improvements - in a separate accordion file, also organized by month. To minimize paper clutter, scan your receipts and save them digitally (see “Going Paperless,’’ below).
The beauty of a 12-month system is that at the end of the year, you can mark the year on the file, and place it on a shelf.
Some documents should be stored separately and indefinitely. This includes medical bills and claims, tax returns, investment records (such as year-end statements for retirement accounts), anything pertaining to property and valuables (including mortgage contracts and assessments), and legal documents (such as wills and those pertaining to estate planning). Make copies of these and other irreplaceable documents, including deeds, titles, stock and bond certificates, and certificates of deposit, and store the originals in a fire-resistant safe or a safe-deposit box.
After you set up your new approach, dedicate some time to its upkeep every week. Aside from proper and frequent filing, perhaps the most important ongoing chore is purging unnecessary and obsolete paperwork (see “Document Retention’’). A good way to manage what comes into your home is to open your mail near a shredder or a recycling bin, so you can instantly discard anything you don’t need to retain.
One way to eliminate paperwork is by using a home computer. Sign up for online banking and bill paying, saving statements on your computer’s hard drive. If you have a scanner, you can turn paper documents, such as receipts, bills, and statements, into digital files. Even an inexpensive one can achieve a resolution that’s good enough for files that need to be archived.
Set up an external hard drive to synchronize with your computer often, and back up your documents regularly. Look for one that has twice the capacity of your computer. Transfer files (at least one-year-old) to compact discs for long-term storage, and keep the discs in jewel boxes for protection. CDs labeled “archival’’ are less susceptible to damage.
The rules for record retention vary depending on whom you consult. If you have the space, err on the side of caution. Keep insurance policies, warranties, and contracts until they’re no longer active. Hold on to auto records for as long as you own or lease your car. After the vehicle is sold or traded in, retain the sales-transaction data for six years. Most bills and receipts can be shredded after you receive a canceled check or a credit card or bank statement.
Paycheck stubs and quarterly investment records should be stored for one year. Seven years is the rule for retaining credit card and bank statements. Never toss receipts and documentation for tax-deductible items, tax returns, house-related records, most IRA contributions, and annual investment statements.
Adapted from Martha Stewart Living by Martha Stewart for Boston Globe January 28 2010